The math behind this calculator (click to expand)
Federal income tax uses progressive brackets that stack: each dollar of taxable income is taxed at the bracket it falls into, not your highest bracket. The formula is the sum across brackets of (min(taxable, bracket.max) - bracket.min) * bracket.rate when taxable > bracket.min.
FICA stacks 6.2% Social Security on Social Security wages up to the wage base ($184,500 in 2026) and 1.45% Medicare on Medicare wages. This annual-liability model also applies the 0.9% Additional Medicare Tax above the filing-status threshold: $200,000 for single or head-of-household filers and $250,000 for married filing jointly. A qualified Section 125 health premium reduces both Social Security and Medicare wages; a traditional pre-tax 401(k) does not. State and local income taxes are modeled separately.
Implementation by Michael.
Your Paycheck Has Five Tax Layers - Here's How Each One Works
On an $85,000 salary filing single in Georgia, your biweekly paycheck drops from $3,269 gross to roughly $2,505 net - a 23.4% reduction. But that 23.4% isn't one tax. It's five separate calculations stacked on top of each other, each with its own rules. The bracket visualization above shows how this model allocates taxable income across its rate schedules. Here's what's happening at each layer.
Layer 1: FICA - The Tax That Hits First and Hardest
Before brackets enter the picture, the employee FICA share is generally 7.65%: 6.2% for Social Security (capped at $184,500 of Social Security wages in 2026) and 1.45% for Medicare (no wage cap). On $85,000 with no Section 125 deduction, that's $6,503/year, or about $250 per biweekly period in this even-period model. Traditional pre-tax 401(k) contributions do not reduce FICA wages. Qualified Section 125 health premiums generally do reduce both Social Security and Medicare wages under IRS Publication 15-B.
Additional Medicare Tax illustrates why a liability estimate and an employer withholding calculation are different. This model uses the final tax-liability threshold for the selected filing status: $200,000 for single or head of household and $250,000 for married filing jointly. An employer, however, must begin Additional Medicare withholding after it pays one employee more than $200,000 in the calendar year, regardless of filing status. For a joint return, the final liability test uses both spouses' Medicare wages; this single-salary input does not add a spouse's separate wages. The difference is reconciled on Form 8959. See the IRS Additional Medicare Tax guidance.
Layer 2: Federal Tax - Progressive Brackets, Not a Flat Rate
Federal income tax is progressive - different slices of income are taxed at increasing rates. On $85,000 single, subtract the $16,100 standard deduction to get $68,900 taxable. That $68,900 spans three brackets: 10% on the first $12,400, 12% on the next $38,000, and 22% on the remaining $18,500. Total federal tax: ~$9,870 (11.6% effective rate). The bracket viz above shows the 22% bar partially filled - that's your top bracket, and only $18,500 of your income actually pays that rate.
Layer 3: State Tax - Where Geography Costs Real Money
Nine states charge zero individual income tax. The other 41 (plus DC) range from low-rate schedules such as North Dakota's to California's 13.3% top bracket. On $85,000 single, this model estimates state tax at $0 in Texas, about $3,493 in Georgia (4.99% after the official $15,000 single-filer standard deduction), and about $3,660 in California after its modeled basic exemption credit under the state's progressive schedule. Drag the salary slider to $200,000 and watch the state comparison change as higher brackets begin to apply.
Layer 4: Local Tax - The Hidden Layer Most Calculators Miss
About a dozen states allow cities or counties to levy their own income taxes. New York City adds 3.08-3.88% on top of New York State's already-steep rates. Philadelphia's resident rate is 3.735% effective July 1, 2026 - making PA's flat 3.07% state rate much less flat in practice. Ohio cities like Columbus, Cleveland, and Dayton all charge 2.5%. Maryland counties generally add 2.25-3.2%. Portland-area workers can face both Metro SHS (1% above $128K for a 2026 single filer) and Multnomah County PFA (1.5% above $125K, rising to 3% above $250K). For an $85,000 earner in NYC, this model estimates about $2,860 per year of local tax - more than many states charge in total.
Layer 5: Pre-Tax Deductions - Your Tax Shield
Pre-tax 401(k) contributions reduce taxable income for federal and state taxes (not FICA). At $85,000 in Georgia with a 22% federal + 4.99% state = 26.99% combined marginal rate, every $100 to a 401(k) saves $26.99 in taxes. Contributing $500 per biweekly paycheck ($13,000/year) drops federal tax by about $2,860 and state tax by about $649 - total tax savings of about $3,509 on a $13,000 contribution. Your paycheck drops by about $365, not $500. The bracket visualization shifts visibly when you add deductions - watch the top federal bracket bar shrink.
Annual Liability Estimate vs. Payroll Withholding
The calculator starts with annual salary, subtracts the modeled pre-tax deductions and standard deduction, estimates annual income-tax liability from progressive brackets, adds FICA, and divides the result evenly across pay periods. It does not implement Form W-4 elections, IRS Publication 15-T wage-bracket or percentage-method withholding, credits, year-to-date wage timing, bonus withholding, multiple jobs, or employer-specific payroll rules. Those differences can make an actual pay stub materially higher or lower, even when the annual tax-liability estimate is reasonable. Our line-by-line pay-stub guide shows where to find current and year-to-date wages, taxes, deductions, and net pay before comparing them with this planning estimate. The gross-pay and taxable-wage guide explains why federal, Social Security, and Medicare wage bases can diverge before tax is calculated. At year end, the W-2 box guide shows how those running totals become Boxes 1, 3, and 5, the withholding boxes, and Box 12.
What must be rechecked when the tax year changes
The Social Security wage base is announced annually rather than forecast by this calculator. The modeled 2026 base is $184,500; a future-year calculator should change only after the Social Security Administration publishes the new contribution and benefit base. Because employers stop Social Security withholding after an employee's year-to-date Social Security wages reach that year's cap, the update can materially affect higher earners.
Federal brackets, the standard deduction, benefit limits, and many state schedules also refresh on different calendars. PennyCalc does not roll those numbers forward by a generic inflation assumption. Each release is checked against the final IRS, SSA, and state-authority publication; inputs that are not yet final stay marked provisional with their limitation shown in the source registry. This avoids presenting a plausible forecast as an enacted tax rule.